You are an analyst for XYZ Real Estate Inc. The vice- president has asked you to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are an analyst for XYZ Real Estate Inc. The vice- president has asked you to perform a basic analysis on an industrial property that the company is considering acquiring. The vice-president is adamant that XYZ Real Estate will only acquire the property if the project meets its investment WACC and/or required equity return of 14%. He provides you with the following information: XYZ Real Estate has an income tax rate of 28% The anticipated holding period is 7 years The acquisition price will be $20,000,000 and acquisition costs should be an additional $200,000. The property should generate NOI of $1,600,000 for each of the next 10 years At the end of the seventh year the property will be sold at an anticipated cap rate of 8% and sales expenses will be $400,000 The financing will be a 7-year mortgage at a rate of 5% with a 25-year amortization and have an initial LTV of 75%. a) b) c) d) e) Calculate the unlevered NPV of this investment Calculate the unlevered IRR of this investment Calculate the levered NPV Calculate the levered IRR of this investment Would you recommend buying this property (answer Yes or No)? You are an analyst for XYZ Real Estate Inc. The vice- president has asked you to perform a basic analysis on an industrial property that the company is considering acquiring. The vice-president is adamant that XYZ Real Estate will only acquire the property if the project meets its investment WACC and/or required equity return of 14%. He provides you with the following information: XYZ Real Estate has an income tax rate of 28% The anticipated holding period is 7 years The acquisition price will be $20,000,000 and acquisition costs should be an additional $200,000. The property should generate NOI of $1,600,000 for each of the next 10 years At the end of the seventh year the property will be sold at an anticipated cap rate of 8% and sales expenses will be $400,000 The financing will be a 7-year mortgage at a rate of 5% with a 25-year amortization and have an initial LTV of 75%. a) b) c) d) e) Calculate the unlevered NPV of this investment Calculate the unlevered IRR of this investment Calculate the levered NPV Calculate the levered IRR of this investment Would you recommend buying this property (answer Yes or No)?
Expert Answer:
Answer rating: 100% (QA)
XYZ Real Estate Investment Analysis Discount Rate 14 WACCRequired Equity Return Tax Rate 28 Holding Period 7 years Acquisition Costs Property Price 20... View the full answer
Related Book For
Auditing a business risk appraoch
ISBN: 978-0324375589
6th Edition
Authors: larry e. rittenberg, bradley j. schwieger, karla m. johnston
Posted Date:
Students also viewed these finance questions
-
You are an analyst with Perception Partners and have been asked to make pricing recommendations regarding the acquisition of Rose Garden Apartments. This project was built five years ago and contains...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Do you agree or not? Specialization of labor and better use of capital goods can initially generate increasing marginal output (returns) for a firm in the production of a good.
-
Dr. Jake Lambert signed an employment agreement with Baptist Health Services, Inc., to provide cardiothoracic surgery services to Baptist Memorial Hospital-North Mississippi, Inc., in Oxford,...
-
What will be the output after implanting the following IS cod let id; let mjr, id=1; switch (id) { case 0: mjr="BIT"; break; case 1: mjr="IS"; case 2: mjr="CS"; break; case 3: mjr="English"; break; }...
-
Water flows under the sluice gate shown in Fig. P4.45. If \(V_{1}=3 \mathrm{~m} / \mathrm{s}\), what is the normal acceleration at point (1)? Figure P4.45 Sluice gate R = 0.12 m (1) V = 3 m/s
-
Sonia, a retailer, has the following assets: a factory worth $1 million; accounts receivable amounting to $750,000, which fall due in four to six months; and $20,000 cash in the bank. Sonias sole...
-
Copy your question from the blogpost and paste it in the first bullet in a Word doc.Then cut and paste the relevant principles of law, supported by cases, statutes, and other authorities that you...
-
Refer to the North Valley Real Estate data, which report information on homes sold during the last year. For the variable price, select an appropriate class interval and organize the selling prices...
-
What is the depreciation charge of an equipment purchased five years ago for $200,000, and a expected life of 10 years if it is depreciated using the MACRS method? a) $6,560 b) $23,040 c) $18,440 d)...
-
Take a GOOD look at the java files given and then compile and run them. We have a Point, Square, and Cube. The Point has three doubles for the X and Y and Z coordinates. This is an example of a...
-
1. Simplify the following expressions using Boolean algebra. x= ABC + AC W=ABC ABC+A
-
Hydrogen is a small atom. Hydrogen can cause major problems in various materials. It can migrate inside the material and at the phase boundaries or microcracks hydrogen gas is formed at high...
-
One hundred students are writing the final exam in Dr. Strangepork's course on statistics. The mean score on the final exam is 54 with a standard deviation of 8. Treat these as population parameters....
-
The velocity of an airplane flying into a headwind is given by v(t) = 30 (25-t2) mi/hr for 0 st4 hr. Assume that s(0) = 0. a. Determine the position function for Osts4. b. How far does the airplane...
-
Bentley Corporation received cash from issuing 14,000 shares of common stock at par on January 1, 2018. The stock has a par value of $ 0.05 per share. What is the journal entry to record this...
-
Study the pictures/images below. Obviously these was focus on LT sociology, anthropology and poltical science. Try to do some analysis by finding clues that are synonymous with the main concepts....
-
Do you agree or disagree with the following statements? Explain your rationale. a. A primary purpose of an audit is to ensure that all fraud that might be significant to a user is detected and...
-
What responsibility does the auditor have to determine the estimated life of a new asset that has been acquired by the company? How might an auditor go about determining whether the estimate of...
-
What is a compliance audit and how does it differ from an operational audit?
-
Why is it important to pay attention to cultural differences when interviewing a client?
-
What does the term "unauthorized practice of law" mean, and how does it limit your relationship with a client?
-
Why is it important to acknowledge how a client is feeling at the initial interview?
Study smarter with the SolutionInn App